After incubation with soluble immune response suppressor (SIRS), a product of concanavalin A-activated Ly2+ T cells, macrophages release a factor that suppresses in vitro antibody responses, DNA synthetic responses to T-cell and B-cell mitogens, and division of several tumor cell lines. This factor, macrophage-derived suppressor factor (M phi-SF), is a protein with an apparent Mr of 55,000 that is inactivated by sulfhydryl compounds, certain amines, and iodide but not by other halides. In experiments reported here, conventional SIRS and SIRS produced by a cloned T-cell hybridoma were used to analyze formation of M phi-SF by SIRS-treated macrophages. Formation of M phi-SF was insensitive to inhibitors of protein and prostaglandin synthesis but was sensitive to catalase and cyanide, indicating that M phi-SF was not a newly synthesized product and that peroxide was important to its formation. As M phi-SF and SIRS have similar molecular weights and other properties, it is possible that M phi-SF is SIRS modified by peroxide. To test this possibility, SIRS was treated with H2O2 and M phi-SF activity was determined. H2O2 at 0.1-1 pM was sufficient to convert SIRS to M phi-SF; the reaction required approximately 15-20 min and was sensitive to cyanide. Several conventional peroxidase substrates inactivated M phi-SF produced by the SIRS-H2O2 reaction or by SIRS-treated macrophages. In addition, catalase and several of the compounds that directly inactivate M phi-SF also partially interfere with SIRS-mediated suppression of antibody responses. Collectively, these data suggest that SIRS-treated macrophages produce H2O2, which converts SIRS to M phi-SF, which has properties of an oxidized peroxidase-like protein and acts by oxidizing cellular components essential for cell division.